Transcript from HODLCast Ep. 65 — originally recorded on February 6, 2019
Sasha:
All right. Hello everyone. Good morning. Today is February 6th, 2019. This is the HODL cast and we have a special guest, Jared, from Moon Math Win. Jared, can you give a little introduction of yourself and how you got involved in this Bitcoin space?
Jared:
Yeah, so I’m a software engineer. That’s how I pay the bills. I’ve been a software engineer for 16 years or so, I’ve definitely been around the block. I tend to focus on open source stacks and open source technologies. I became aware of Bitcoin around 2011. A friend of mine told me that they had figured out a way to solve the Byzantine General’s problem. And so, I went and checked it out and I thought, I should totally launch up some laptops and do some CPU mining, and then I never did it. Probably the single, stupidest thing I’ve ever done in this space, was not do that. I did another stupid thing when I didn’t start mining Ethereum. It is when it was in beta, they were doubling rewards, they were promising everyone, every ETH that you mind will pay two X. I saw that it could turn into something. And then I became aware of the theory in 2013, at least the early phases of it.
The project has been in development for a long time. I started reading the source code around the beginning of 2014, end of 2013. I can’t remember exactly. It’s tricky trying to remember what you thought of things at the time. A lot of time has passed since I got into this stuff. I didn’t really start getting into investing in Bitcoin. I really started thinking seriously about it in June of 2013, and then, I started pulling the trigger a few months after that. So, I wouldn’t say that I’m early investor. There are a lot of guys around who have been in this longer, and there are several guys on the r/BitcoinMarkets who have been around a lot longer than I have.
Sasha:
Yeah. I came into this space in the summer of 2014 and I had been aware of it since 2011. One of the portfolio managers when I worked at NEI Investments, Christine Hughes, she was talking about it at $2. I didn’t know how to buy it. I signed up for various meetups in Winnipeg, which was my sales territory at the time, well, Manitoba & Saskatchewan. Then I moved to Halifax and joined the meetups there too, but I never actually attended any. When I moved to Jacksonville for law school, I kept my work computer intending to use it as a miner. I don’t know how technical that would have been or not, but that was my goal and that never happened. I wish I had been a little more perseverant. When the price hit $236 I remember boarding a plane listening to a state of the markets call at our company and thinking, damn, I missed it. But then I listened to Andreas Anatonopolis the whole ride from Halifax to Florida in my u-haul. Then I kept listening to more as I painted my whole apartment for a few days. Then I went on upwork and found a job that night as a compliance officer for an ATM company, paid $20/hr in Bitcoin. I thought it was a nice work-around for the restrictive student visa employment rules, until I realized it really wasn’t. Anyway, I was late to the party in 2014, and then when I really got into it in 2017, I feel like I had a lot of catching up to do.
Jared:
I mean, the reality is you look around, and those guys are massively outnumbered. They don’t even really register. People are pretty surprised to see anybody who’s been around since 2013, 2014. At one point, I implemented a 2013 veteran tag on r/BitcoinMarkets, and I thought I was going to be overwhelmed by people asking for it, and it ended up just being a handful of people who got one, for the most part, I think a lot of people don’t want to be known as someone who has Bitcoin. And I think a lot of people don’t really want to associate their accounts with having been around it that long. So that could be some of it. But I think that we are pretty much massively a minority.
Sasha:
You’d think all the newer people would want one of those badges, especially if they’re trying to do fundraising. You could sell those things for a lot of money, no doubt.
Jared:
Yeah. I don’t think r/BitcoinMarkets really moves the market that much. We do occasionally, but we get a fair amount of spam people trying to post things to their crypto startups on the site or they want to notify people about airdrops. There’s a lot of spam that comes in through people who have medium blogs. I think medium is probably one of the primary sources of spam right now. We blocked medium because we get maybe 10 percent legit and 90 percent of it is people just pretending to be legitimate. We don’t even allow a lot of self-posts at this point because of the amount of spam that happens. At r/BitcoinMarkets, we’re trying to keep the conversation focused on trading. And there are a lot of people who want to make it an emotional experience or they want to advertise their favorite alt-coin. They’re trying to take the discussion and derail it. There are other subs that are excellent source for that kind of stuff, and we’d like them to go use those resources instead.
Sasha:
So, do you keep the conversation strictly to Bitcoin then?
Jared:
Yeah, we try to keep the conversation pretty strictly to Bitcoin. When other alt coins are mentioned, we generally try to encourage them to use the Bitcoin trading pair instead of the USD trading pair. A lot of people just want to use the USD trading pair. I think it’s common for people to calculate their wealth in USD. And, like I said, there are better communities for that conversation and we try to encourage them to use those other sources. I think they don’t like to use those other sources because these other sources are like a big fish in a small pond versus a small fish in a big pond. So everybody wants to be as loud as they possibly can and I think they feel like they can get more exposure in r/BitcoinMarkets, but it’s a little bit trickier be accepted by our community than it is in these other communities. So, there are bandwidth issues when you get into those other communities.
Sasha:
Can you also tell us all about your website, moon math win?
Jared:
Oh, so moon math win was just something I coded up in an afternoon. There’s a long history of price forecasting with the price of Bitcoin and two of the major perceptions about what will happen with the price is whether is it growing at a logarithmic rate or is it an exponential rate. It doesn’t matter to me which one it is, the question is what model fits better. I think the logarithmic rate has shown out in the charts a little bit more accurately. You can write log equations that have a pretty low R squared value for evaluating. Basically, the error on the line is a little bit better if you use a log graph versus an exponential graph to chart the price. Moon math started as sort of a tribute to a user called ASOP. He doesn’t really post anymore. I haven’t checked for his posts in a while, but I don’t think he posts anymore. And there’s a link to his site, ASOPstability.com in the header of the moon math site. If you go there, you can see the last time he posted. I think it was November 2017. He was really influential in the sub and everybody respects him, respected him. I don’t think a lot of people know who he is anymore because he just doesn’t post anymore. But people were always waiting for him to post his updates and the ASOPstability.com was put together so that he had a space outside of the sub to make regular updates. He was doing everything in excel. And that I think was impractical for him to maintain and he probably got wealthy and bored with it, so he stopped posting. That’s my guess. I don’t know. So yeah, that’s really the source, the original source of moon math. Later on, I started working with this chart where I’d extrapolate out the price and calculate a compound daily periodic rate for the price based off of an arbitrary starting date, which for the most part, it’s just the first day of the year since 2011. I think July of 2011 is the first column on that chart. Uh, and then it gives the last 30, 60, and 90 days, I stopped updating it. I stopped adding columns, largely because the chart is so big that it’s already illegible. I’ll probably eventually skip her every other year or something like that. So, I made that table and I started posting it in r/BitcoinMarkets. And then a user who ended up becoming a good friend of mine coined the term moon math and I started using it to label the trial.
Sasha:
Can you explain how the compounding daily periodic rate works?
Jared:
So, compounding the periodic rate is just a compound interest formula, except instead of calculating compound interest over a year or months or weeks, it calculates it per day. So, when your credit card interest is charged, I believe that they charge credit card interest using a compound daily periodic rate. Every day that you owe a debt to your credit card company, they’re going to calculate how much you interest you owe for that particular day. So, you can determine the compound daily periodic rate from Bitcoin. And basically, how that works is as if you go back in time to 2011, you look at the price difference, you say, okay, in order to extrapolate out where we’re at today, there would be some natural exponential growth as a result of the compounding formula. And then to reach today’s price, if you compound every day from that price, this is the rate that that comes out the other side of it. So, it’s the same thing as trying to figure out how much time is left on your house loan and how much you’re going to pay in interest to the bank versus the actual value of the loan. It’s all the same math.
Sasha:
Great explanation, thank you. So, I’ll just give some of the stats from the chart, since we’re an audio only podcast today. So, we’re saying from 2012 to present or at a 65,812 percent increase as of today’s Bitcoin price. And then the 2011 to present is actually like 1 million, 157,245 percent and the 2010 is actually over 4 million. This is incredible a to look at.
Jared:
I don’t think we will see returns like that on Bitcoin in the future. For Bitcoin, I have the same value as gold in US dollar combined. I think Bitcoin has to go 100 X, it only has to be 100 times more valuable than it is today to have the same economic footprint and as measured by market cap, which is a bad measure, but as measured by market cap, that’s crazy. That’s the thing that’s really crazy is to think that this is 1 percent of US dollar plus gold globally. That is insane. It blows my mind to think that it could be half of that or a quarter of that. But it doesn’t really blow my mind. If you think about Linux and where Linux started is you’ve got a guy in a dorm room who’s working on an operating system and he releases it publicly and people start using it and then open source starts and you haven’t even reached the 90s.
Like the internet isn’t even really relevant at this point, and then it explodes. Massive companies grow out of it. You have the Linux kernel, which is, I believe is more important than any business in the world currently. Like the Linux kernel is the most important piece of software in the world today. Linux kernel development is a really big deal, and nobody sees it, understands it, knows anything about it. The economics of the open source movement don’t make sense to people. It doesn’t make sense that you can have a massive movement that’s being contributed. People are giving their time to make this thing work. Why are they giving their time? And the reality is, is that there’s real economics behind why Linux and open source work, but it on the surface it doesn’t make any sense. And if you were to describe the concept of open source to somebody, even today, if you were to just take the ideas and concepts of open source and pitch it to a businessman, they’d laugh you out of the room. It doesn’t make sense that it works on the surface. It requires a depth of understanding about game theory and human motivations and economics. It just doesn’t compute when you look at the basic proposal, which is that we have this thing that runs our traffic lights and vehicles and web servers and thermonuclear missiles, and it doesn’t make sense that the basis of that free software for everyone. And it isn’t free software for everyone that drives it. It’s, it’s all of this other stuff.
It’s really well described in a speech that was given in 1996 called, the cathedral and the bizarre, and I think that actually became a book. The cathedral and the bazar, that’s an important concept to the open source community. And the concept there is that you have a cathedral in this metaphor. The cathedral would be like Microsoft and the Bazaar, which is the open source community. The concept of the bizarre is that you just do one thing better than anybody else. I mean that’s really what open source is about. You just create a project. You do that one thing. It only does that one thing. You don’t attach the kitchen sink to it. You do it better than anybody else.
And then, as a result of it being used, being done better than anybody else, other people just adopt your code and integrate it in their systems. And because they’ve adopted your code and an integrated it into their systems, now they have an economic incentive to maintain, or help maintain that code because it’s essential for their systems to continue functioning. And that’s sort of what links all these open source products together is this bazar of mutual self-interest, versus the cathedral, where the cathedral like Microsoft is, always creating these large monolithic projects that are just supposed to solve all the problems that you have. So that’s what you have, open source coders work in this environment called the shell, frequently. They use a coder called VIM frequently or you know there’s VIM versus E-macs wars. We don’t need to get into that. Microsoft world is largely driven by visual studio and visual studio is like it’s an IDE where all of your problems are solved for you versus this other one is focused system, which is like we just want a command line and we want a black screen with a blinking light and we’re going to start coding. The approach and the thought process, the whole world around it is very different. And I think we’re starting to see that breakout. And to tie this back in what we’re actually talking about, I think you see that dichotomy developing and in cryptocurrency there’s this dichotomy that’s forming between the theory of them and Bitcoin, and I think you have, Ethereum is kind of trying to be this large cathedral where there’s a very controlled space. There is a hierarchical top down distribution of software and supportive methods and everything is supposed to be supported within that space versus the Bitcoin approaches. Let’s just do this one thing better than anybody else. So, integrated into their systems and then everybody can build around it and in their own directions and we can create a chain of interdependence.
Sasha:
Oh, that’s such a great analogy for the two. I hadn’t heard or even really thought of it that way before. That’s excellent.
Jared:
Yeah. I don’t think the people who are in this space, who are like trading in this space and investing in this space think about things in terms of software development. They’re not looking at these movements in software development that I think are deeply ingrained in what’s actually being worked on. Things that are a little bit more focused on just what’s happening with the price, and they’re looking at features and thinking that what’s going to work is going to be the most feature rich thing. And I just don’t think that’s the thing. I don’t think features are ever the thing to focus on. I think that’s an illusion. The reality is that anything that can be done on Ethereum can be done on Bitcoin. It’s just, it has to be done in a different way, and it’s being done in a different paradigm, and it’s my belief that the bazar paradigm is the better paradigm than the cathedral paradigm. I’m wired that way. I want it to actually be a full free and open system.
Sasha:
There’s a lot of challenges to that free and open system being put forth lately around the money transmission and the OFAC side of things. I’m getting a little bit jaded the last a couple of weeks looking at some of the regulations wondering, could this curtail the whole thing? But then it’s so refreshing to talk with someone like you that has a positive outlook for Bitcoin. And seeing these numbers here, it’s like, oh yeah, this thing, it doesn’t care about these regulations and they’re not going to stop it. What one country does, or the fungibility issues of cashing out and having to put your KYC information, all these white lists that are getting created and that premiums being paid for coins that are fresh off minors versus coins that have traveled through the market a bit. It’s worrying to me, but in the end it won’t matter.
Jared:
Yeah, I think all of this stuff does come back to the bazar concept. I think if you work within an economic system that really cares about where finances came from, Bitcoin is the right choice because it is relatively transparent. You can’t hide your transactions on Bitcoin. It’s pseudo anonymous. It’s not actually anonymous. If somebody really wanted to track you down and you’re using Bitcoin, they could track you down. If you’re going to convert it into cash, if you’re going to spend it at somewhere, at some point, eventually a human’s going to get ahold of it and they’ll trace it back to you. There are ways you can often escape that within the system. The effectiveness of that obfuscation is dubious, and it becomes more expensive and transaction fees are higher. I don’t think it’s good for society to try and hide its largest trend. I don’t think that it’s good for society to have the largest transactions based on the settlement layer. I think that that should be transparent. And that’s kind of the direction I think Bitcoin is headed. I
think that the regular use case of you can go and buy your coffee with Bitcoin is being resolved by lightning and there’ll be other implementations like lightning that are built on top of Bitcoin. So, this is another sort of software concept that you can take code and you get to take approaches within this space, and you can reapply them wherever you want. Solutions that are created inside of Ethereum can be applied inside of Bitcoin. Once the concepts are out there, they’re readily available. Think if you wanted to have Bitcoin 10 years earlier than you do now, pretty much all you’d need to do is go back in time and provide a capsule that says make proof of work sufficiently difficult to verify the blocks. And then you have Bitcoin 10 years earlier because it’s just that concept of making block verifications sufficiently difficult. That concept, it’s very simple. And that one concept is what creates an actual blockchain like the proof of work that’s involved in verifying each block is the thing that allows each block to be secure. And that’s the Byzantine general solution. Should we go back and talk about that, because I’ve mentioned it twice now.
Sasha:
I’ve read about it, but I think you’re going to be able to explain it a lot better than I could.
Jared:
Okay. So the Byzantine General’s problem is, well, imagine you’re a Byzantine general and your lieutenants are out on the field and they’re trying to send you information about what’s happening on the battlefield, but they have to use carrier pigeons and they write a little note about what’s happening on the battlefield and then send their carrier pigeon to you. You receive your carrier pigeons, you make your decisions, and then you send your carrier pigeons back out. The problem with that solution is that you don’t know if the pre-care your pigeon has been intercepted. You don’t know if some messages are getting to you and some aren’t strategically, or are you getting all of the right information at the right time? You don’t have any transactional security between you and your lieutenants if you’re sending messages by way of carrier pigeon. So, you come up with machinations to overcome this problem and you increase the sophistication of networks over time so that you get better and better carrier pigeons, and then you move from carrier pigeons to motorcycles. It gets more and more complex. You can look at the communication that’s happening in world war two, around the enigma machine and say, Oh, that’s like the modern world war two version of the carrier pigeon. And yes, in fact, that is the world war two solution. And so, all of this cryptography has moved forward in time and initially it’s all moved forward for this sort of battlefield utility. It’s still law that you can’t trade cryptographic secrets across borders in the United States. And there was a really big problem with PGP around this as well as there was some legal issues around open source and cryptography. To this day, there’s probably still some frustration around this in the US government and other governments about cryptography becoming this big open thing. But the reality is, is that cryptography works much better when it’s open because when it’s open, it’s all being attacked simultaneously, which is one of the reasons SHA-256 is the best form of encryption for data that falls into this category. So that’s the full long-winded rabbit hole version of Byzantine general.
Sasha:
Wow, now that is a succinct and descriptive explanation.
Jared:
Well, I was explaining something else before that though.
Sasha:
I think we were just looking at whether or not, I was saying that I was a little nervous around all of the transparency that’s being required in governments. And you were saying it’s actually okay to have the open layer to be a visible and we will have certain levels of privacy on second layer for things like Starbucks transactions.
Jared:
Yeah. I think the reality is, you can use the second layer, you can have that transparency and it’d be a lot cheaper to obfuscate your transactions on a second or third layer. Then on the core layer, needing to have transparency on the most secured layer or needing to have fungibility on the base layer is not a practical use case.
Sasha:
Well, holding your own keys solves a lot of the fungibility issues or what do you think around institutional storage for some people?
Jared:
So, there’s a woman who’s wildly intelligent on this type thing. She lives in Wyoming right now, Caitlin Long and she writes about rehypothecation within Bitcoin and rehypothecation, it’s essentially when you create financial instruments that devalue the core assets. So rehypothecation is happening with gold and paper where I buy some gold that’s leveraged against the larger system like basically 10 percent of the gold that’s claimed within our economic system actually exists. So, you have to wonder, what is actually gold. And say you have gold bugs who are just buying real gold waiting for the hammer to drop on rehypothecation of gold and waiting for the hammer to drop on the US dollar. And it gets pretty crazy pretty quick when you start talking to those guys.
But what they’re saying is not unsound. Hard money is a real concept and the rate of inflation that we see around the dollar and rehypothecation of gold as a real problem. And I think generally you do want to look at what those people have to say and take it pretty seriously. Uh, you can’t just, and indefinitely inflate the value of money. And that’s sort of what the FED tries to handle with inflation rates. The system of economics that we have right now is just trying to manage it well enough so that people believe that it has value. I don’t know how long that can continue. It’s a relatively recent development to have money that works like this, especially on the global scale. Just because it’s worked for the last 50 years doesn’t mean it’s going to continue working.
Sasha:
Absolutely. We’re getting close to negative rates, it really makes no sense. I think that’s why we’re still seeing a growth in people setting up new Bitcoin wallets and clearly these numbers here in your moon math charts are pretty incredible. It doesn’t look like much is going to stop bitcoin or what, what do you think? Is there anything that we should be, as a community, trying to prevent from happening to keep bitcoin moving at the path it’s on or what do you see for the future?
Jared:
It really is. Moon math stuff really is entertaining. And I think back to gold bugs, like if you go and talk to a gold bug, they’ll show you a moon math chart of gold typically, they’ll pull something out like that. It’s really common for that to be the basis for how a lot of people think about this stuff. And that can go on for years, decades for some people. To me it’s interesting and the math is useful and real. It’s important to understand how compounding rates work. So, it’s useful in that sense. And that’s a very practical application of moon math. But as far as using moon math to imply where the price will actually be in 10 years, 20 years, I would be very surprised if moon math plays out the way it’s drawn today. It would probably need several corrections over time. And I don’t know if it needs corrections for the price because the price goes higher or if it needs correction because the price goes lower. I can’t predict that. I mean, sort of the point of what’s going on there is to create the line of best fit. So, you’re trying to come up with the equation that best represents how the price has behaved in the past. Now extrapolating that out to how the price behaves, or should behave in the future, is definitely a dubious thing. And it does that on the site and that’s part of the entertainment value and it should be looked at as that. The moon math site is for entertainment. That is, it was for my personal entertainment and it’s also to record these past ideas that have had some staying power within the community.
I take two people who’ve presented these concepts in the past and their usernames has stuck and had been associated with those. And it’s the log graph, the exponential graph, it’s ASOP and it’s really supposed to just show those two equations. And then I added in my own moon math table. And I calculate it dynamically based on today’s price at moon math dot win. And that’s pretty much the extent of it.
I think another part of your question is what actually is in store for Bitcoin in the future. I don’t know, but there are several very interesting things I think you’re thinking about when you’re talking about the future Bitcoin. One is, what is the future of development with Bitcoin, which lots of people talk about the features, the update rate of Bitcoin core. You’re talking about a lot of interesting things about that. There’s also the future of the price. The price is interesting in that, are we going to see cycles, boom and bust cycles like we’ve seen in the past? Are we going to see increases in stability in the future? Are we going to see more adoption from progressively larger institutions? Are we ever going to see a stampede of institutions into Bitcoin? There are less interesting things like, is there going to be an ETF? Is Bakkt going to be relevant to the market? So, I guess which one of those things do you want to know more about?
Sasha:
Maybe the institutions flowing in if they could actually hold Bitcoin. So, there would be real buying pressure compared to holding some kind of derivative instrument that tracks Bitcoin. I think it could be the law of supply and demand, I would say that that would really put some upward pressure on the price. But they have a lot of custody issues. Basically, they have to have somewhere they can trust to hold it. It can’t be held with the individual fund manager. I’m not sure exactly what those custody issues look like, but it’s against the idea of holding your own keys. And I think that’s what the general investor wants anyway, is somewhere they can trust. I come from a financial background where I worked with mutual fund companies for quite some time before getting into Bitcoin, and when I talk with my old clients around that, they all want to know how they can access it through some kind of brokerage house. So, I think that is what the mass market would demand and support.
Jared:
The institution question is largely pointed at the United States and, and Europe in the UK and Southeast Asia. There’s a fair demand in India as well. I mean, globally, these institutions are being developed to support all of this. I think my perception of the institution question is that it’s largely focused on US institutions and the US onboarding. So, US institutions, at what point do fund managers say, well, we need to have something in this space because you can get the single largest returns on it. And now there’s this way for us to get into it. Will fund managers ever actually say that, or will they always laugh at Bitcoin and think it’s this stupid thing for internet nerds? I think you have businessmen across the United States asking what actually is a blockchain? And they’re getting mixed messages about that. You’ll have people saying, Oh, well, blockchain is the future. You should be developing software for your clients using blockchain because it’s the most secure way to handle data. And then you’ll have other software engineers saying, no, that’s not true. A central database is still the best way to store your data. There are specific use cases where you could use a blockchain within your systems, but you need to look at those. That’s a conversation not for the businessman, but for the nerds. And as soon as it’s a conversation among the nerds, the businessman just turns off, right? They’re not going to have anything to do with that. So, I think we’ll see blockchain as a concept among businessmen just thrown out over the next couple of years. You want to get locked out of a room; you’ll mention blockchain.
Sasha:
Yeah. And they have such a vested interest if they haven’t gotten in yet, it’s like they might feel like they missed the boat. So, they might have an emotional reason to discredit this blockchain or Bitcoin industry too. Imagine how shitty you’d feel if you were a financial advisor who missed the dot com bubble, sat on cash in 09, and missed bitcoin?
Jared:
Yeah. And I think we’re going to see increased division among the crypto space about blockchain versus Bitcoin, and Bitcoin versus Ethereum. And we’re having the conversation of what consolidation actually looks like within the community. And I think when you say the crypto space is consolidating, I think you’ll get some businessmen to perk their ears up and say, Oh, consolidation. That’s good. That means that the market’s getting lean. And so, you may have more businessmen who are savvy, and less risk averse. They say, okay, I’m willing to put a little bit more into this. They’ll get in for the next run. People need to take a real look at the assumptions they’re making about what drives Bitcoin, what drives the price.
Sasha:
Can I ask you, what do you think caused the December 2017 run up? What were the driving economic forces that led to that? I still can’t make heads nor tails of why the price did what it did, but it was truly incredible.
Jared:
I’m going to make some listeners angry. Anybody who is into crypto is going to get really mad at me and you for having me on your show after answering these questions. Okay. I got to figure out a way to say this. So, it doesn’t make everybody just immediately angry, because this is a charged topic among people in the space. I think some of the run-ups were real demand, over the counter demand. We did see more accounts created at Coinbase. We saw more accounts created with bitstamp, we saw the transaction rate increase on Bitcoin, we saw the meme pool fill up, so there are natural reasons for the price to have increased. Now, were those people signing up because they want a Bitcoin or were those people signing up because they wanted to trade altcoins. I think a substantial amount of the transactions we saw in 2017 where people flooding into Bitcoin so they could get a piece of the altcoin market and speculate on that and use leverage trading. I think we saw a huge growth in leverage trading that also increased demand. And you saw a lot of people using VPNs to go over and use BitMex. And I have charts that show the volume of BitMex. BitMex basically takes over the market in 2017, 2018, and it doesn’t just kind of take over the market, it IS the market. And it coincides with Asian markets dropping interests. I haven’t even really got into the controversial part of my answer. This stuff is all the uncontroversial part. This is just setting the scene for what was happening in 2017 and 2018 from my perspective. There were other things happening in the space at the time, but I think the primary driver was speculation of altcoin markets and people trying to find the next Bitcoin. And I think the crash is probably not caused by those people. I think the crash is caused by exit scams and probably caused by organizations that had promised things that they knew they couldn’t deliver a suspect that they couldn’t deliver, exit scamming. And what I mean by exit scamming is, they either knew that they couldn’t deliver or realize that they couldn’t deliver and then cashed out as much as they possibly could as quickly as they could. And that’s the story of 2018. So, there are other aspects of that, that go a little deeper. I think that, when you had people flooding into Bitcoin and then using Bitcoin to buy alt coins, they drove the market cap of those alt coins up. And we’re going to go back to that concept of rehypothecation. The number of Bitcoins that were available to buy back the altcoins was not as high as people thought. And then you also had the introduction of stable coins, like USD T, Tether, that gave people an alternative exit route. And so, the market quickly deflated as it realized it didn’t have the Bitcoins or the cash to pay out people who had what was supposed to be very valuable coins. And so now we’re seeing massive deflation in the market. And you’re seeing that the alt coins are getting hit a lot harder. If you go over to coin market cap, you won’t see that as much. You’ll see Bitcoin at probably 53, 54 percent today of the market. I think that will increase. And I also think, if you look at the number of coins outside of the top 10, and the market value of all the coins combined outside of the top 10, you’ll see that the price has been rising slightly or their percent of market share has been rising slightly. And I think the reason for that is issuance of new coins, one, but also that the alt coin market hasn’t fully consolidated yet, and that were the continuing issuance of these new coins means that there’s still a speculative bubble in play. So, when you have guys like Tone Vase on Twitter saying, Hey, we’ve got another drop down. I think they’re looking at the irrational exuberance around alt coins and they’re saying we haven’t consolidated enough because there’s all this garbage out there that still thinks it has value.
Sasha:
Yeah, I remember my former paddling coach who didn’t know anything about bitcoin, he’s a firefighter, and one hell of a coach, he called me up in October 2017 and I was trying to explain that only Bitcoin had longevity, I luckily landed in a telegram group of really intelligent guys from Jacksonville who were predominantly maximalists and saved me from going through all the hype and it helped me cut through the nonsense that was going on out there. Trevor, my coach, he’s an eloquent speaker, he said, and he had all the fire crew on speaker phone, he said, Sasha, I don’t want the big one, I want the new young rising star. If you think about it like the Olympics, Bitcoin is Andrew Phelps, I want the new 12-year-old who’s going to be the next Andrew Phelps. And that’s where every scammer’s message hit home, they built a “better, faster, cheaper” Bitcoin, and during the hype, regular people believed those promises. Hey, they make sense on the surface, especially at the time when the meme pool was clogging up. It’s human nature, everyone wants to improve on what’s already been built, and everyone wants to be in early on something and look like they knew something nobody else was smart enough to see. But Bitcoin isn’t about speed, it’s about security. If any of them stuck around through the cycle, they probably came to learn the differences.
Jared:
So yeah, and that’s all a natural part of the boom and bust cycle, in any market, you will see it expand and contract with hype cycles. You’ll see new entrants coming into the market, make it interesting again, and then it will contract back down. Happens with cars. Look at Tesla, it’s a great example, great product, great company. And they’re getting trashed right now because they’re trying to make a change in the industry towards greater maturity within their product. And I think there are a lot of people who think that they are just not going to be able to make that transition. And they may be right. I think there’ll be wrong, but it is a difficult thing to transition from an immature perspective of, Oh, we can do anything we want to perspective of, okay, these are the practical realities of the business. At some point you actually have to turn a profit. And the reality is almost none of these alt coins, and by almost, I mean 99 point nine nine nine percent of them, they’re all going to fail for one reason or another. So that’s another interesting part. Going back to the future question, one of the things I think we’ll see playing out in the future of Bitcoin, is that we’ll start seeing successful, or more successful, 51 percent attacks against small market cap alt coins. And we already saw that with Ethereum Classic.
Sasha:
Yeah. The people doing those are almost doing a favor to the industry by exploiting the flaws. If it can be attacked, it’s really clear evidence that what everyone on the technological side is saying is true. It’s hard if you aren’t a technologist to know who to believe, but if it gets hacked or 51% attacked, it’s pretty clear. The bounty on Bitcoin is so big it makes it pretty obvious that if it could be attacked, it would have been already.
Jared:
Yeah, I think what something really difficult culturally for people in the United States is taking the word of professionals and taking it seriously. I think there are a lot of people in the United States who don’t take medical doctors seriously. There’s anti-vaxxers, a large movement in the United States. And there are a lot of people who just don’t take the credentials of professionals. They think that the professionals don’t know what they’re doing, pretty frequently. It’s not as much like that in other parts of the world. And then people would come back at me and they’ll say things like, Oh, well you were just talking about the cathedral and the bazar. So clearly you support more distributed understanding of the world. And that’s true. But I’m not exactly sure who’s coming up with better medical science than universities and, and hospitals. I’m not sure who’s practically competing in that space for better information. You don’t say, Oh, well, the soothsayer is a valid competitor to modern medicine. That’s not how it works. And people of all intelligence are susceptible to this pattern of thinking. I mean, the example that immediately jumps to mind, people are going to hate me for this too, but Steve Jobs. Steve Jobs had a guru tell him how to treat his cancer. That’s insane. We’re talking about somebody who is respected by some of the most intelligent, capable, confident people in the world and seen as an authority himself, discredit the authority of the medical profession.
Sasha:
I think the medical industry, or the pharmaceutical industry in particular, and the ridiculous ads that go along with them, are a large reason people have come to question what doctors say. I guess, the profit motive does that, it’s a type of invisible hand that forces people to act in their own financial best-interest. Also, with Bitcoin, with Bitcoin, it’s hard to know who the premier university medical doctor of this space is because we get so many different people with so many different opinions and it’s difficult to vet who’s saying the intelligent thing, or whose saying the loudest thing, it’s a challenge to know who you can trust.
Jared:
Yup. That is perpetually the problem. I think that’s playing itself out in many sectors. It’s hard to watch. Yeah, it seems to me it’s obvious who you should listen to.
Sasha:
Would you mind recommending some of the ones that you like listening to? I really liked Peter Todd myself. There are a couple people on Twitter. Jamison Lopp, and I’ve been following the Merkel Report. They put out some good curated stuff.
Jared:
I think I would actually, if you only listened to one person, I would listen to Peter Todd, and he’s a former core contributor. He understands the space, he understands the economics, he understands the decisions that core is making and how all that works.
Sasha:
Okay. I’m going to start following him even more carefully now after that recommendation. And, back to what you were saying regarding the price in 2017. So, I’m still struggling to understand how Bitcoin can be this big tool for freedom and liberation if it’s actually going to require KYC and an OFAC search (or more importantly, a ban against entire countries from using Bitcoin, or selling Bitcoin that was used by them). I think this regulation is inherently bad for Bitcoin and Bitcoin should be free and fungible. I kind of attributed the onset of the enforcement actions from both FinCEN and the SEC as a contributing factor to the price drop, but you believe the price drop was primarily driven by the exit scams? When I think about regulation, maybe it’s also just like a growing pain and a maturity point that will lead to a better system where people can have more trust in the whole working of it. So maybe what the SEC is coming out with trying to get these cathedral coins to be registered in a very similar to the rest of the stock market operations, maybe that’s not a bad thing. And then Bitcoin is kind of outside of that mess itself. But even the places that store Bitcoin, they need certain levels of regulation too so that some of these scams, these exit scams and people disappearing with the coins can stop happening.
Jared:
Oh man, you just mentioned a lot. There are a lot to unpack there. First, cathedral coin is a great term. I hope that turns into a meme. That’s brilliant. You get all credit for that.
Sasha:
No, you’re the one that brought it up.
Jared:
No, no, but that’s your phrase. Oh man. I’m going to use that. That’s beautiful. The next thing, just that small point of clarification. I think that it’s a combination of factors that caused the draw in price. So, on the surface it looks like it was in fact the exit scamming, I think more deeply, I think it was an artificial inflation and market value caused by the creation of too many alt coins. And I think, if you go back, there is an interview blast and in December of 2017 with Alan Greenspan commenting on on Bitcoin, and he was asked about Bitcoin and I think he answered saying Bitcoin, but I think what he was talking about was crypto currencies in general. He said something along the lines of, I just hope that they don’t issue too many of them. And at the time, I think everybody interpreted that as like, Oh, Alan Greenspan doesn’t understand that the supply of Bitcoin is limited. And I think what he was actually saying was, I hope that they don’t overinflate their market by creating too many artificial assets too quickly. I think what he was saying was more sophisticated than he communicated.
Sasha:
But since it’s so easy to create a coin, I mean, I have a fricking coin for the podcast cover art. I don’t think we’re going to ever stop people from wanting to create their own coins when they get into this stuff. It’s a combination of marketing & ego & novelty that new entrants just can’t resist. Although, actually, the regulatory hurdles do pose a barrier to entry for those following the rules.
Jared:
Yeah. I don’t know. But like there’s so many questions that are being answered by the market playing out. To get a final answer on that stuff, we have to wait for the market to play out.
Sasha:
Ya, we can just wait and look backwards. It all becomes clear through the rear view.
Jared:
Yeah. We’re going to have to wait and look backwards. We can prognosticate all we want. We’re just pantomiming based off of positions that we’ve been on in the past and that’s just not where we’re going to be in the future.
Sasha:
Well, according to the moon math, looks like in the future, what’s one of the most exciting ones? So over twenty thousand, we have 20 and 22 or it looks like 20, 33. Okay. How did these works? You have in the day, there’s a possibility for the over 20,000 that it happens in 2023 but then in the 90 days, it says never.
Jared:
Yeah, so there’s periods of time, the label on the top of the chart. And on the left it has various metrics, like what’s the starting date of it. What’s the percent change since the start of the date. How frequently does it double and how many days were in this period? Since 2016, there’s been 765 days, since July 2010, there’s been 3,124 days. It’s projecting that on the seven-day column, the price has changed 1 percent over the last seven days. That gives a compounding daily periodic rate of point two one one three percent. So that means if you’ve launched from the closing price of last of midnight, GMT, if you project that compounding daily periodic rate out, and you would want to see when the price will reach 1 million dollars, you’d reach the price of 1 million dollars in June of 2026. June 8th of 2026 to be precise.
Yeah. So, but then you look over at the 60 day and you see, Oh, well over the last 60 days, the price of Bitcoin’s only gone to 2 percent. So there’s a more conservative compounding rate, daily pre-write periodic rate. Instead of point two one one three percent, it’s point zero three two eight percent. So it’s a much, much slower rate of growth. Annually, you’ll only see a 12 percent growth in price. And that means that on June 2nd of 2066, you will have a price of 1 million dollars. And so whenever you have a negative growth rate, obviously the price is projected to be going down instead of up, so it will never reach a higher price than it currently is. So you’ll get a column full of nevers instead of the projected date. So that’s absurd to project to 1 million dollars. And that’s why I said the bottom.
So there’s a dynamically changing price targets depending on the current price. So right now, the lowest price target for it is 5,623 dollars and 41 cents. I can’t remember exactly how it came about that. I think that price is a 75 percent of the way to 10,000 dollars as illustrated on a log graph. So algorhythmically 5,623 dollars and 41 cents. I believe that’s 75 percent of the way to 10,000 dollars. And everything is done on log graphs. So that’s why we figure it that way.
Sasha:
Fascinating.
Jared:
But it’s arbitrary. It is absolutely price targets. It’s arbitrary. The bands on the graph or on the charts are arbitrary as well.
Sasha:
I’m gonna treat it like the bible and wait for that million dollars. Just kidding.
Jared:
Yeah, you’re going to be waiting till 2066. So, I started a new DCA sort of cost average fund for moon math. It’s the Tesla fund. And I decided I wanted a Tesla. And in order to get my Tesla, If I were to buy a Tesla alone, I think the monthly payments would be the model X. I think to buy a new model X, I think was 140,000 dollars. So on a traditional car payment that’s 3,000 dollars a month. So there’s no way I’m going to spend $3,000 a month on a car. I don’t have a car payment currently and I don’t want a car payment ever. So, how much do I have to save every month if I want to buy a model X? Oh, I have to save 13.3 years at 500 dollars a month to buy a model X. Well, that’s a long time to wait, but I guess I wait 13.3 years, that’s fine. It’s a nice car. I can wait that long. So I’ll put away 500 a month. And then I thought, well, okay, what happens if instead of just putting it in a savings account or just putting in CDs or whatever, I put the 500 dollars a month into Bitcoin, and then we’ll see if on that DCA, can I buy a Tesla before 13.3 years or is it going to be more like 30 years? And we’ll see.
Sasha:
As long as you don’t lose your private keys.
Jared:
Yeah, exactly. You mentioned about the stuff in Canada, with the Canadian exchange.
Sasha:
Yeah. That’s terrible.
Jared:
So apparently that guy, who died, so for anyone who’s listening, a CEO
Sasha:
Omar.
Jared:
Yeah, Omar, CEO of an exchange in Canada, apparently died in India, and he was the only person who had the private key to a 190 million dollars in Bitcoin. That’s insane.
Sasha:
Do you know the rest of it?
Jared:
So the rest of it is that, nobody actually believes that he died. Everyone thinks it’s an exit scam. Well, it’s just an exchange exit scam, and that everybody lost. Basically everyone lost their money because they don’t have private keys. So, and then if you deep dive a little further, you realize that this guy might’ve actually been a regular contributor at r/BitcoinMarkets.
Sasha:
Oh no.
Jared:
I think I’ve probably gotten fights with this guy before or maybe I agree with them. I have to go back and look. But I guess he was a regular contributor. I don’t remember if I had conversations with them or how those conversations went.
Sasha:
Well, it wasn’t Omar, until yesterday they found out, or maybe it was the day before yesterday, they found out he had served in jail in America for some kind of passport ID fraud scams.
Jared:
Yeah. The guy’s a total scammer. He has the most punchable face. On a scale of one to punchable, it’s punchable.
Sasha:
Yeah. That death certificate that they put forward from India.
Jared:
It’s insane, it’s totally insane. I think there’s a moderately high probability that he’s still alive, and that it’s a scam. I think there are other possibilities too. Another possibility is that he went to India to acquire some Bitcoin, or he went to India with Bitcoin, or anyway, I think someone might’ve known that he was Bitcoin rich, and it might have been a physical attack and he might actually be dead and his keys might’ve been stolen by the attackers. That’s not a theory that’s really out.
Sasha:
Yeah, I hadn’t heard that.
Jared:
I haven’t shared that theory with anyone, and I haven’t read it anywhere, but that’s something I suspect as possible. The number of physical attacks against people who hold Bitcoin is on the rise year over year.
Sasha:
Yeah. Certainly, it seems like India that’s happened a few times. Some exchange CEO got kidnapped in India I think.
Jared:
Yeah. So this is potentially a very serious thing. It’s serious for many reasons, it’s sad that he died, and I think that it’s important that a lot of people who are thinking about this sort of reflect, if he is dead, it’s a really sad thing for him and his family, and his business partners. It’s really sad for thing, for the exchange. It’s really sad that all those people lost access to their money. This isn’t, Oh, well we take our licks and we learned our lessons kind of thing. This is really tragic. And aside from it just being tragic, I think there are things that could have been done to prevent it. Whatever the actual story is. I think there’s things that could have been in place that would’ve prevented what we saw happen. Uh, it’s if the exchange, if he really was the only person who had the keys at the exchange, that’s really sad. If the exchange wasn’t providing for his physical security while he was traveling abroad, that’s something that that could have protected them as well. Use of multisig, well it could have helped protect him as well. Just use of multisig. If it was a kidnapping, he would say, well, I can’t transfer it to you because it’s a multisig wallet. You have to get my business to release the funds as well. That changes it from a, we torture you until you give us your keys to, okay, this is now a kidnapping and it’s a negotiation and we have to keep you alive and healthy so that we can negotiate with your people who can get the funds that we desire. So, there’s solutions in place, there’s so many solutions in place that could have prevented this tragedy. None of them were used. And I feel like the general response to this is that it’s a joke. If you listen to the NPR coverage of it, they basically turned it into a joke. No, it’s not funny. This is tragic. The community that’s supposed to trust these people, the people who they’re supposed to be trusting aren’t using the technology the way it’s supposed to be used. And in fact, the problem goes down to the base users. And so what do you do? Right? We do need to learn our lessons and we need to take it seriously. And there’s just not enough serious discussion happening around it.
Sasha:
And it’s happened to so many exchanges, not to this level, but I think the amount of loss from exchanges over the past 12 months or 24 months, it’s pretty staggering around the world. It raises a big question of how to handle it. And, I guess it will probably be sorted out over time. But I know that case is actually being heard in Nova Scotia and that’s where I grew up. Bitcoin already has such a stigma from people that are not involved with it. It’s just drug money or it’s all the scams that they hear about in the news, and it sucks that there’s been so many scams in it. This one’s a huge one and I feel bad for people that lost their money on it, and how do they know not to trust them if you’re just new in this? We don’t even know whether we can trust any of these exchanges. So far Coinbase, they don’t seem like they’re going to do an exit scam or anything, but there’s not a lot in place that would stop any of these centralized exchanges from doing it. There’s law that would stop them, but the nature of the technology, it is different than storing funds at a bank that has several digital and physical custody safeguards in place.
Jared:
I think the single most important thing that individuals can take away from these stories is that, you need to have a hardware wallet, which is a physical object that stores your Bitcoins. Don’t use the paper wallet. That’s generally the paper wallet generation stuff. As we were talking about this, I’m actually reaching over to grab my hardware wallet just to make sure I know exactly where it is. So I’m right now, I’m looking at my ledger nano S, and it’s a black object that’s got a shiny metal thing that wraps around it as a USB connection point. It’s got two buttons on it and that’s a little physical object that’s like a bank in my pocket, and it’s a cold storage place where I put some of my Bitcoin, and I have my Bitcoins in different places. I put my Bitcoins in different places. They’re physically stored on items that are disconnected from the internet and I use different methods to do that. At any given time, if someone were to try and get my Bitcoins from me, like they’d have to have all of these physical objects to get them from me, and then it would be very difficult for someone to get all of my Bitcoin, they could probably get some of them that they physically kidnapped me. Now if it were an online account, the way most people use computers is that, they log into their Coinbase account, or they log into their Gemini account, and then they buy Bitcoin and then they leave their Bitcoin on those accounts, and that’s their storage medium. And then there’s layers of security that are provided for that. That level of security is not sufficient to protect your Bitcoin if someone physically grabs you, it’s not sufficient to protect you if there’s an issue with the exchange and they shut down, that is not a sufficient form of long term storage, in the current way that Bitcoin is used, you should be thinking about storing this stuff for decades, not storing it like a checking account. This isn’t like a bank where you go, and they take the responsibility for your money. When you use Bitcoin, you’re responsible for your money and you’re responsible for your transactions and holding it. And it’s not like putting it underneath your bed. You need to actually think about how to physically secure your savings.
Sasha:
What are the plans if you die?
Jared:
Yeah, exactly. If you die, how is that going to be recovered? And you need to work with lawyers around the United States, you need to find a lawyer to help you navigate that.
Sasha:
That’s what I thought I’d end up doing quite a bit, helping people with their wills and especially around Bitcoin, but I haven’t had a single customer ask for that yet. I’m not reaching out to that area of the market either though, but I think Bitcoiners are preppers in a lot of ways, but think they will always survive and don’t need to worry about a backup plan for their coins.
Jared:
You should. I think part of the reason might be that, the people who are buying Bitcoin right now and probably for the next little while, are all high-risk people. They don’t think about their death. They don’t think about it. They are people who are capable, frequently, of a high time preference versus low time preference, not thinking, what we could get into. That’s Saifedean’s his book basically. The Bitcoin Standard, is that well understood among your community?
Sasha:
I’m not sure.
Jared:
The Bitcoin standards is definitely worthwhile book to read. He’s an interesting character. Let’s leave it at that. But I like his book. I think it’s interesting, the approach that he took of going over the difference between hard money and soft money and explaining past economic systems and current economic systems, the choices he made around when he wouldn’t discuss around that. He doesn’t really get into things like debt. And I think he does that intentionally because the way debt works in our current economic system is pretty complex. You could write a whole book about Bitcoin debt versus Fiat debt on our current economic system, and how that could potentially play out. It’s something that the market is yet to discover, it’s my view of it. I think he has a lot of interesting perspectives in that book about what money is, what Bitcoin is. And I think he has a lot of interesting perspectives about why Bitcoin works economically better than other systems, and why it will prevail over alt coins. I think he has a pretty authoritative answer to that.
Sasha:
You have a quote from it? Can I read the quote you have on your website?
Jared:
Yeah, sure. That’s from Nicholas Nassim taleb, I think.
Sasha:
Bitcoin has no owner, no authority that can decide on its fate. It is owned by the crowd, its users, and it now has a track record of several years, enough effort to be an animal in its own right. I like that. His mere existence is an insurance policy that will remind governments that the last object the establishment could control, namely the currency is no longer there, monopoly. This gives us the crowd and insurance policy against an Orwellian future.
Jared:
This, that’s an inspiring thing. And I think Taleb categorically understands, what it means to be deeply attached to the reality of a thing versus the theory of a thing. So that’s from the introduction to the Bitcoin standard and Nicholas has seemed to be a very intelligent man and thinker and a writer. And you can read some of his books, one of his books, Black Swan theory. Should basically be required reading, I think at this point, I think that a lot of the ideas he has about the world are consistent with what’s going on with Bitcoin because Bitcoin tries to be a very, down to earth, practical single solution for a single problem kind of thing. Sort of like the Linux kernel is a single solution problem. They’re very deep and they’re used in a great many ways and they underlined much larger structures. But at their core, they’re very focused on a very tangible core reality. That is uncomfortable for most people to navigate and Taleb is very connected to that, that world of thought.
So earlier I launched in a discussion about trusting authorities who have credential, like medical doctors. It takes that a step further, I think. And he calls people on their bullshit. Their systems of thought that are considered legitimate that are not legitimate. This happens with this, a debate in the r/BitcoinMarkets community of whether or not TA has any validity. Sometimes it does have validity and then sometimes it doesn’t. And then some people use it well and other people don’t use it well. And then there’s a lot of people who think that the whole point is that the r/BitcoinMarkets sub is just to share and talk about technical analysis of the Bitcoin price, that is a proper use of the sub, but that is not the proper use of the sub.
I think Taleb would be very critical of a lot of the TA that happens in our sub. And I think the reason that you’d be critical of is that, it tries to say, Oh well there’s probability of X happening so X will happen. So you see a lot of people saying, Oh, we’re getting a double bottom here, and then the double bottom never plays out. And then they’re like, well, TA is bullshit. It never works. Well, when you’re talking about it as top a double bottom, you’re talking about probability and the issue is probability is that it’s still kind of a coin flip every time you hit the event. So if you’re saying, okay, my approach to trading is every time we see a possible double bottom, I’m going to buy, because if the double bottom plays out, there’s a good return. Well the problem with that is that, the double bottom only plays out 35% of the time when you notice it before confirmation. So, if you’re buying, then, chances are you’re going to generally lose because most of the time it’s going to break down. It won’t actually double bottom. Oh, so what’s the purpose of TA? well buy the breakout? Well, if you try to always buy the breakout, it doesn’t work because by the time you’re in, you notice that the price has changed. Or by the time you get your order in, the move is completed, and you’ve missed out on it completely.
Sasha:
So, all in on a poker hand before a flop.
Jared:
Exactly. There’s no actual way to know the future, and people who look at TA, and say, oh well I know the probabilities, so I know the future. They’re not trading. They might win for a little while, but over the aggregate, they’re just going to lose all their money. So, you can’t use it that way. I follow TA and I look at it mostly for the same reason that I made the moon math site. The principals that are involved are fundamentally interesting. I don’t think they can predict the future. I think they tell a story about the past, and I think we can use it to inform our conversation about the fundamentals of what’s presently happening. And I think that’s the way Taleb looks at all this stuff. I think that’s the approach that is being taken with the Bitcoin Standard and that book is there. He’s talking about how money has existed historically for the last 10,000 years, how have humans traded with each other? How have we dealt with understanding value and trying to provide an answer to that, and then saying, well, how does Bitcoin actually fit into that narrative of how humans exchange? And that’s a fundamentally interesting conversation. It asserts that over time, Bitcoin will win out, and be the dominant chain and that all this other stuff will fall to the wayside. And that’s the maximalist perspective. People call me a maximalist and I don’t identify as a maximalist. I identify as a realist.
And I think the realistic perspective is that the market is going through a period of consolidation, and that period of consolidation will continue until it stops consolidating. And that means that presently I’m bearish and that I don’t know when we’ll hit a market bottom, but I think consolidation is continuing, and I think the consolidation is good for the market overall. My favorite example of consolidation is the beer market because everybody likes beer. And if you look at the way the beer market has developed over the last 150 years in the United States, you see that, it starts as a lot of small pubs and a lot of brew pubs and they’re making their own beer and there’s regional beers. And then that keeps going until there’s a Black Swan event. There’s prohibition in the United States, and then all of the beer that’s coming into the United States is either made in people’s bathtubs, or it’s imported over state lines or its being imported from Canada and Mexico illegally. And there’s a whole system of devious behavior, so it goes back to basically, the dark ages of alcohol. It goes back to like really old systems of transfer of transferring mediums. Like you no longer have access to major ports. All of it’s being shipped on dirt roads, by cart and buggy, basically.
It wipes it out, and then it restarts again. And everyone who’s become rich off of this arcane system of transport, they start creating breweries and things like that again. And the market develops up again and it expands, and then it begins to consolidate, and consolidation within the beer industry looks like beer companies being bought up by other beer companies, and you have that happening clear up to the nineties, until you’re down to three beer companies, yet you got Coors, and you got Budweiser, and then, I don’t even know who the third one was. I can’t remember that. There’s a book on this, called the brewing industry in the United States, some day to some date. And then they go over the whole history of this. It’s a fascinating read.
So basically, beer companies consolidate, then we went into a phase where people were really unsatisfied with their beer options, and craft beers and microbreweries started popping up and become a bigger thing, and then new Belgium becomes established with a fat tire. And then people start to discover that beer can have more interesting flavors to it. And that it can be something that you can be snobby about. And so, the options expand. And now we’re going through a period of consolidation again, where those small breweries that started up are being bought up by Coors and by Budweiser. And craft brewing has becoming commoditized again. Markets shift in these ways and the brewing moves so slowly that you have time to consider it and see a lot of nuance within that market. And what we see in Bitcoin and cryptocurrencies is that market playing out at Lightspeed.
Sasha:
I had a statistics professor in the second year of my undergrad at the University of Western Ontario. Sadly, I can’t even remember his name, but he used to show us the long-term chart of copper, dr. copper, and some other metals as the basis for each lesson. He said we never need to worry about running out of resources because of “human ingenuity.” His thought process has permeated a lot of my thinking ever since, that was 2002.
I also saw a talk by this economist, Harry Dent, he wrote the 2009 book, The Great Depression Ahead. He works for a, or perhaps owns a Mutual Fund company in Tampa. And he was talking about generational consumer spending patterns and market cycles, looking at everything from a macro perspective with a long time horizon. It was pretty interesting. Some of the charts were incredible. It’s hard to find that zoomed out macro, long time-horizon view of bitcoin because we don’t have 100 or 1000 years to examine. Moon Math is the closest to it that I’ve seen.
Jared:
Yeah. I think you can look at the moon math’s charts with that in mind, is that there’s unpredictable seasonality within Bitcoin, and there’s seasons of stability. There’s seasons of boom, there are seasons of bust. It’s all over the place. It’s really dynamic thing. It’s impossible to predict what it’s going to do.
It looks to me we’ve gone through a season of bust that’s unprecedented. If you measure a stability using Bollinger bands. Bollinger bands describe a range of volatility within the price. And if you measure the width of those bands, you get a relative measure of price stability over time. And it changes based on the period that you’re looking at. So, if you look at Bollinger bands over a week, you’ll get very different results versus Bollinger bands over a day. But if you look at weekly volatility for Bitcoin’s price, of course you see high volatility when the price is going up rapidly. Until recently, you never saw low volatility followed by high volatility where the price goes down. That happened for the first time ever when we dropped from 6,000 to 3,000. This is a weekly chart. And Bitcoin’s relatively young. It took 10 years to have that event happen, and it just happened.
There’s always something fascinating happening with the price in that regard. We had a season of stability followed by another season of extremely bearish movement. What caused that is the conversation that we had earlier. But I think it’s interesting to see how we move through those different seasons. And we’re right now, we appear to be in a season of stability and then seasons of stability are obviously followed by seasons of instabilities. So, we will go through this period of stability. The price will stay relatively range bound, and then it’ll break out either to the positive or the negative. And we don’t know which way that’s going to be.
Sasha:
Okay, well, I’ve really enjoyed this discussion. Thank you so much for these wonderful insights. Where can people find you? I guess on the website and Twitter?
Jared:
Yeah, you can go to moon math dot win, and there’s links to my Twitter account there and my Reddit account. I’m most active on Reddit. Occasionally I post on Twitter. I tend to retweet a little bit more on Twitter than I post. But you can find good people to follow. When I retweet stuff, I’m re-tweeting people who are just always posting good stuff. But go to r/BitcoinMarkets. You can join the conversation there. That’s where I moderate, and you can just come and hang out and see what everybody has to say.
Sasha:
Okay. Awesome. Well, thank you so much for your time over. I’ve really learned a lot talking with you. I loved the cathedral and Bazaar comparison you made.
Jared:
Yeah, the cathedral coin, I’m still not over that. I love that.
Sasha:
Awesome. Well, thank you very much. And we’ll talk with you again soon or I’ll see you on Twitter or maybe I’ll join the https://www.reddit.com/r/BitcoinMarkets/
Jared:
Cool. Sounds great.
